Market breadth sucks.
That’s not me being dramatic. That’s the actual state of the tools most people use to read this market, and they don’t work the way they used to.
You’ve been taught that a negative advance-decline line, meaning more stocks going down than up, tells you the market is weak.
You’ve been taught that ticks and breadth tell you what’s really going on under the surface. For most of market history, that was true.
Watch what happens now. This morning the market was moving up while the advance-decline line went negative.
You can literally sit there with 10, maybe 15 stocks trading to the upside and still have a marketplace that is incredibly hot. That’s how screwed up we are.
How is that possible?
Because a handful of multi-trillion-dollar organizations, with the heavy order flow that follows them, are the whole market now.
When memory and chip stocks caught a bid this morning, that was the entire move. Apple was down.
Microsoft was down. Google, financials, energy, all of it was nothing, and I do mean nothing. Nobody gives a crap about anything but memory and chips.
So your advance-decline line looks awful. It’s a slop fest, a pure 50/50. And the market rips anyway.
That’s the lesson, and it holds regardless of what the tape does tomorrow. Market breadth, ticks, the advance-decline line, whatever you want to call it, they just don’t mean what they used to in a world where a few names carry this much weight. If you’re still reading those internals like it’s 2005, they will tell you the exact opposite of what’s happening.
The NASDAQ this morning would have been up 550, almost 600 points if Apple, Microsoft, and Meta weren’t dragging on it. A few stocks put weight on the whole index.
A few other stocks carried it. Everything in the middle, the stuff the breadth indicators are actually measuring, didn’t matter.
So what do you trust instead? Order flow.
Specifically the options order flow at the bell, because that’s what makes the difference, not the futures, not the breadth reading, not the ticks. When a stock is bid before the open, you’re more likely to see call buying drive it once that bell goes off. That’s the tell worth watching.
Stop grading this market on a report card built for a different era. The breadth is going to lie to you. The order flow won’t.
If the indicators can lie to you before you even place a trade, you need something that can’t. A process you run every single time, that doesn’t care what the breadth is doing.
I put five of them together.
Five quick checks, sixty seconds, and they catch the bad options trade before you ever click buy. It’s called The 60-Second Checklist That Stops A Bad Options Trade, it normally runs $29.97, and it’s free today.
To your success,
Don Kaufman
